How Does a “Proof-of-Reserves” Audit Address Rehypothecation Risk?

A Proof-of-Reserves (PoR) audit is a cryptographic verification process where a custodian proves they hold the claimed amount of client assets. By publicly verifying the total assets held against the total client liabilities (often via a Merkle Tree), the audit provides transparency that the assets are indeed present and not being improperly rehypothecated or used elsewhere.